Reduce Gujarat Fluorochemicals; target of Rs 3190: Prabhudas Lilladher

Prabhudas Lilladher's research report on Gujarat Fluorochemicals

Gujarat Fluorochemicals (FLUOROCH) reported consolidated revenue from operations of Rs11.5bn, reflecting 15.8% YoY increase and 3.4% QoQ decrease. Sequential decline was due to 7% decrease in Fluoropolymers segment due to seasonal impact, however prices remained stable except for commodity grade PTFE which is facing pressure from China. This segment's contribution is expected to grow as one of the industry’s established players cease production in Dec’24. Refrigerants prices increased during the quarter, still fluorochemicals segment saw a QoQ decrease of 4%, due to flat performance from specialty chemicals. The management expects refrigerants prices to go up further, and has announced new capex for up to 30,000mtpa of R-32 which was initially kept on hold. The bulk chemicals segment operated at full capacity and has recorded 14% sequential and 2% annual increase in revenue, as caustic soda and MDC prices improved during the quarter. Battery chemicals segment is expected to contribute to revenue from this quarter, with product validation currently in advanced stages.

Outlook

Fluoropolymers, rising refrigerants prices as well as commencement of battery chemical segment will drive growth going ahead, but the stock looks richly valued and is currently trading at 55x FY27 EPS. We maintain “REDUCE” rating on the stock, with target price of Rs3,190.